Can You Have Multiple Life Insurance Policies?
You may not think about life insurance much, but the idea of whether you can have multiple life insurance policies probably passes through your mind every once in a while.
It’s easy to imagine how that idea comes into your head.
Maybe you already have life insurance for your family, but a radio or TV commercial comes on. And, they sure can be compelling.
Or, perhaps somebody you know has passed away, and suddenly you’re wondering if your own policy would be enough if the unthinkable happened.
So if you’re wondering if you can have multiple life insurance policies, the answer is yes.
But is it a good idea, and should you do it?
We’re going to help you answer that question. In fact, we’ll even ask a few more questions and toss in some answers for the low, low price of absolutely nothing.
How Many Life Insurance Policies Can You Have?
You can buy as many life insurance policies as you want..
But, really, don’t.
It’s really very unlikely that anybody would need a large number of life insurance policies.
One is probably just fine, while two or three may work out well, too.
There’s another reason you probably will never have 17 life insurance policies.
Insurers tend to not insure somebody when you go overboard. They have no problem with people having multiple insurance policies if the reasons you’re getting the coverage make sense.
Let’s say you make $100,000 a year, and you have bought a bunch of life insurance policies.
If you were to buy the farm, take a dirt nap, collect your $200 but don’t pass Go… or whatever euphemism you prefer… and your family collected $1 million or even $2 million, insurers wouldn’t think much of it.
You clearly want to provide for your family if you and your $100,000 paycheck isn’t around, and it wouldn’t make sense to only get life insurance for $100,000.
You want to get enough money so that your family can pay off the mortgage, send the kids to college and perhaps sock a lot of cash into the bank. A lot of people want to go rather big with a payout, so their family is extremely protected if something would happen to them.
But if your family were going to get $41.3 million in life insurance payouts if you were, say, hit by an ice cream truck, somewhere along the way, insurers might start to refuse to sell you a policy.
They may start to think you have a death wish or at least a desire to check out and leave your family loaded – and their business model prefers it if you stay very much alive.
And from a practical standpoint, if you owned a ridiculous number of life insurance policies, the expense of paying for all of them would become too much to handle.
Reasons for Multiple Life Insurance Policies
Why would you need more than one life insurance policy?
Actually, there are several reasons, all revolving around one problem – you may be underinsured.
So here are the situations that might inspire you to start buying more than one life insurance policy.
Your family has gotten bigger
Maybe when you were 25, you had a kid, and you took out a life insurance policy. Good for you. That was a smart thing to do.
But now you’re 45, and you have four kids, and you still have the same life insurance policy that you did back then, and you haven’t increased it. Not so good. Why did you wait so long? You should get more and better coverage, like now, and until you do, be especially careful crossing the street.
Granted, maybe instead of buying a new policy, you could increase the coverage on the policy you already have.
Really, that’s a discussion for you and your insurance agent.
But sometimes it is financially smarter and easier to just apply for a new policy. So now if something goes wrong, you have two life insurance policies covering you.
One reason to not change the coverage on your existing policy: When you were 25, you were young and healthy, and your premiums were low, and they’re still low.
Now, you’re 45, packing on the pounds, and you take medicine for your high blood pressure. Your premiums are going to be higher. So why mess with that first policy and its low premiums?
Again, you’ll want to do the math with your insurance agent, but getting a second policy, in this case, may make more sense.
You have a business – and a business partner
You may want a life insurance policy to provide operating cash for your business partner, in case you made an unplanned and hasty exit.
If your partner would need to quickly hire somebody or multiple people to replace what you do for the company or simply have more operating cash to survive – well, then maybe you should get a life insurance policy.
(In this scenario, if you’re getting a life insurance policy to help out your business partner, hopefully he or she is doing the same for you.)
Or, the money might allow your business partner to buy your share of the business from your kids and spouse – so they’ll have even more revenue and don’t have to worry about the business any longer.
You have a mortgage
Generally, if you get life insurance, you’re getting enough to cover your mortgage and maybe your kids’ college education as well as enough money so that your family can get by for a long spell.
Exactly how much your life insurance payout to your family should be is a personal decision, of course, and it depends on how much you can afford to pay every month for life insurance.
Some people get a separate life insurance policy strictly for the mortgage – maybe you bought a previous life insurance policy before you purchased a house -- and if you feel you’re underinsured, getting a life insurance policy specifically for the mortgage could be a way to solve that problem.
There are hybrid life insurance policies that can be used to pay for the policyholder’s long-term care – and, hey, if you don’t end up using it, it can be paid out when you’re uploaded or when you go to the good place – or wherever you see yourself winding up.
Paying for your funeral
While many people use their life insurance payout, once the funds arrive – sometimes a month after the death – to square up with a funeral home, some people take out funeral insurance, sometimes called final expense insurance.
So it’s certainly possible to have that type of coverage and, say, a life insurance policy for your family and a life insurance policy for a business partner.
Who Should Get Multiple Life Insurance Policies?
It’s probably already clear, but in case it isn’t, you should consider getting multiple life insurance policies in basically two scenarios.
Those who will suffer if your income disappears
If something were to happen to you, and people like your spouse and kids would be in trouble financially, you should get life insurance.
You might be thinking that you’re in great health, and you’re young, and it’s all a racket and so on.
But talk to your friends and family, and you’ll probably hear stories of people they know who were young and in great health – until one day that person they know got cancer and died, and then the living spouse had to get a job and put two little kids in daycare.
It isn’t pleasant to consider keeling over, say, 20 or 30 years from now and leaving your spouse essentially penniless and struggling and wondering why you didn’t buy life insurance.
Buying life insurance isn’t fun and contemplating the end of your life is even less so.
If you live a long life, yes, you can argue that all those premiums were a waste of money.
But you are buying peace of mind, and if you can imagine checking out early and if it scares you to think of how your family would get by, then you can definitely make the case that you should try to find room in your budget for a life insurance premium.
In other words, you believe in life insurance and don’t need to be convinced to get it.
But you realize that if something happened to you, your policy wouldn’t help your family enough, then, yes, you should think about getting another life insurance policy.
And the best thing about having multiple life insurance policies, or enough coverage from one substantial life insurance premium?
Once you automate the premium or premiums through your bank account, you hopefully will never have to think about life insurance again.